I'm an Aussie presently living in London. This blog normally consists of my random thoughts on a variety of subjects, ranging from politics to telecommunications technology, movies cricket, urban design, beer, cheese, and whatever else comes into my head.

Monday, September 25, 2006

Comments that got out of control

This was intended to be a comment left on this post at Jackie's blog, but it got out of control

If you consider the "World camera market" to be the total market for devices that are capable of taking pictures in some way, then the Motorola V3 RAZR is probably the best selling camera of all time. But that doesn't make Motorola an important player in the world camera market in actual fact, because the camera in the V3 is terrible and few people use that particular phone as a camera other than very occasionally. (It is fine as a phone, however). But if you choose carefully how do define the market, you can produce a market share of anything you want. The "market leader" in the camera industry is most definitely Canon, for the simple reason that amongst people who treat photography with a vague level of seriousnous or better, it is clearly the leading brand. It may be that within a few years time people start using their phones the majority of the time as their main cameras, but it is a good way off. And for the sort of photographers who carry an SLR, it will be "never", because lenses will never get small enough. (The question of "share" is also very important. Are you talking the percentage of the number of cameras in the world by volume, by value, by the number of photos taken, by the number of photos taken that are actually shown to somebody later, or what. All Dave Winer said is that Apple are the "market leader' in music players, which I don't think is necessarily even saying they produce the largest number by volume).

And I actually think that cameras and phones are much better suited to be in the same device than are music players and phones. (Why this is I will get to). Generally I just don't buy the idea that mobile phones are going to evolve into these multi-purpose devices that we use for listening to music, surfing the internet, reading our e-mail, et cetera. There are two reasons for this: one aesthetic and one practical. The aesthetic reason is that the more functions you put into the device the less simple it is to use, the more complicated the controls and the menu system, the more general a lot of its user interface becomes, and the less good the user interface is at any particular task. I think with portable devices we are headed for a world in which devices are going to be focused on doing one thing (or a small number of complementary things) really well, rather than doing a huge variety of things. The two portable devices I own that are the most pleasant to use are my iPod (which is just really good at being a music player) and my Blackberry (really good at doing mobile e-mail). I certainly do own multi-purpose smart phone type devices with everything but the kitchen sink in them, but these are more useful as backup for when something goes wrong with the dedicated devices than the devices that I would generally choose to use. In truth the mobile phone industry doesn't appear to have a clue as to how to get the user interface for a music player or an e-mail reader right (although Sony-Ericsson are doing best), which is why I have no intention of doing either of these things on a phone on a regular basis soon. But still I own phone that do these things.

The practical reason is battery life. The more functions you build into one device and which you use regularly, the more power it uses. Playing music is battery intensive, and if you use a phone for playing music a lot, then you phone is constantly running out of power. For many people this is a great social faux pas. Having separate devices means separate batteries, and individual batteries lasting longer. This is a big deal, and it isn't going to change soon.

And as for the iPod dying in 2006, we did get a lot of stories as to how it was in decline in the first half of the year, now that I think about it. Apple had a great Christmas in 2005 with the 5th generation full sized iPod and the 1st generation iPod nano, which were at the time very competitively priced given their capacities. In the first half of 2006 Apple was preoccupied with moving its computer line to Intel and didn't release any new iPod models and didn't drop the price on the existing models (despite the fact that the cost of flash memory in particular dropped precipitously, so that the iPod looked expensive compared to the competition) and large numbers of analysts and journalists assumed that sales have dried up. Apple didn't say anything until releasing financial results in July, at which point it revealed that sales were in fact extremely good (which is presumably why they hadn't cut the price). They have now released significantly cheaper and somewhat upgraded new models, and are going to clearly have another good Christmas. The iPod to me looks as a product to be in rude health, and is the product that is defining the market.

As for what is happening in Asia, there is actually an interesting story there. The iPod seems as dominant in Tokyo, Hong Kong and Singapore as it is here. (It is no coincidence that these are probably the three richest and most fashion conscious cities in Asia). It has a significant but not gigantic share in Taipei. It is not a player at all in Seoul, but Korea is in so many ways a world of its own. My recent experiences of China are indeed that the iPod has a fairly low market share. When I have wandered around the electronics arcades of Shenzhen and Shanghai in recent times I have seen large numbers of cabinets full of all kinds of MP3 players that are not iPods, in all kinds of shapes and bright colours. However, these are I still haven't seen many people using their phones to play music. People are still buying MP3 players as dedicated devices. Mobile phone manufacturers (especially Motorola) are designing mobile phone models specifically for the developing world, and the sweet spot seems to be cheap, elegant and stylish (which people do care about everywhere), and work well as a phone. Music players are nowhere in sight. When people in China want a music player, they buy a dedicated music player. (Photograph taken in an electronics shop in some rather remote corner of Shanghai where the locals really found it quite surprising to see a westerner like me).

However, even in Shenzhen, iPods are in pride of place at the front of the store, and they are what the teenagers are staring at longingly in the shop windows. It is clearly just about money. People buy non-iPod players because iPods cost too much. While most people have to ultimately make do with something cheaper, an iPod is clearly what they aspire to. I saw lots of people with iPod shuffles in Shanghai - a model almost completely lacking in useful features if you ask me - but people spend a lot of money on it in local terms because it is an iPod.

However, if there is a threat to the iPod's dominance, and there has to be one at some point, this is where it is. We have a lot of non-iPod MP3 players that are being produced for Asian markets. A lot of effort is going in to their design. It may be that in this highly competitive market someone gets the design of a player for the Chinese market exactly right in an unexpected way and this new product conquers the world. It may be that the parts for a full features MP3 player become so cheap that the (steadily declining for several years now) prices of genuine Apple iPods are forced down to the point where a relatively high overhead company such as Apple can't make money, at which point Apple possibly does lose much of the market. But that's a way off.

Basic point: I think it is much more likely that the electronics artisans of Shenzhen and Taiwan are going to ultimately defeat Apple in this market than are Nokia or Sony.